Ocean Marine Insurance Policy Information
Ocean Marine Insurance. Insurance on ocean-going vessels and cargo is probably the world's oldest form of property insurance.
The marine policy used today to insure ship owners and others having an interest in property shipped across the world's oceans is more than 300 years old.
Other than a few minor modifications, its language and provisions are essentially the same as when it was developed in the 17th century.
While some variations, in the form of more modern language, are now used this older version remains the basis for all ocean marine insurance coverage.
Ocean marine insurance covers ship owners and others having an interest in property shipped on the world's oceans with rates as low as $69/mo. Get a fast quote and your certificate of insurance now.
Below are some answers to commonly asked ocean marine insurance questions:
- How Much Does Ocean Marine Insurance Cost?
- What Is Ocean Marine Insurance?
- What Does Ocean Marine Insurance Cover?
- What Doesn't Ocean Marine Insurance Cover?
- Where Does Ocean Marine Insurance Cover The Ship And Cargo?
- When Does Ocean Marine Insurance Cover The Ship And Cargo?
- How Does Ocean Marine Insurance Value Ship And Cargo?
- How Does Ocean Marine Insurance Value Ship And Cargo?
How Much Does Ocean Marine Insurance Cost?
The insurance company determines the rates used based on judgment and experience. Policies that cover shipments made or imports received that involve various origination points and destinations have a schedule of rates attached to it.
For example, shipments of a particular commodity to the United Kingdom may be rated at: 11 cents per $100 of valuation, to Italy via Italian Mediterranean ports not east of Sicily 12 cents, to Adriatic ports 25 cents, and to Cape Town, Johannesburg, Port Elizabeth, Durban, and Natal 35 cents.
Separate rates are determined for different commodities, subject to their respective susceptibility to loss.
Ocean marine insurance policies used to insure both cargo owners and ship owners are similar and essentially provide the same coverage.
Marine insurance coverage forms, policies, and rates are not regulated. The insurance company and the insured negotiate each contract. Policies may be restricted or broadened in any way that both parties agree to. Despite not being standardized, terminology basic to all ocean marine insurance policies has evolved over the centuries.
The language used in policies in the past was archaic in terms of modern customs and terminology and many of them have been revised and rewritten to reflect current conditions. However, many terms still remain and continue to be used
While some of these terms and language are confusing and appear to be ambiguous, courts over the years have interpreted them and their intent. While many of these policies have been updated, the terms used over hundreds of years are still appropriate and apply very well to present conditions and circumstances.
The basic provisions of marine insurance policies are relatively uniform and virtually identical. However, different insurance companies format their policies differently and the clauses may be in different places. Some policies are written with qualifying paragraphs next to the insuring clause. Others incorporate the same provisions in succeeding sections of the policy.
What Is Ocean Marine Insurance?
Ocean marine insurance covers three property types: cargo, hull, freight and liability from negligence.
Shipping companies are usually responsible for damage to cargo in their custody but only when the damage is due to their negligence in loading, stowing, or unloading vessels. They are not responsible for loss or damage caused by perils of the sea, errors in navigation, or the vessel's direction.
It can be difficult to determine responsibility for losses due to the vessel's unseaworthiness. The vessel's owner is usually not liable for such losses unless it failed to take reasonable precautions to make the vessel seaworthy.
The details of the contract between the vessel's owner and the shipper can significantly modify these general rules of liability. Without exception, goods transported on the high seas are extremely susceptible to financial loss. Exporters, importers, or lending institutions almost always transfer this risk of financial loss to a risk-bearing entity, such as an insurance company.
The vessel's owner also depends on the insurance mechanism to protect its investment, where a single ocean-going vessel's value can be hundreds of millions of dollars.
The same basic ocean marine coverage form or policy protects the interests of both these parties. The cargo coverage form or policy covers the shipper's goods. The hull coverage form or policy covers the vessel and its machinery and equipment.
What Does Ocean Marine Insurance Cover?
Marine insurance policies can be structured to cover the movement of any kind of legal merchandise. The property insured does not have to be listed or described because the coverage form or policy covers "goods and merchandise."
It is important to understand that this generalization does not include certain types of property and they must be specifically described. Some examples are livestock, frozen foods, refrigerated meats, poultry, and game.
Other property not usually included is currency, bullion, securities, and similar property. The property should always be specifically described to eliminate any possible confusion.
Import Duties and Freight Charges - Ocean marine policies may be written to cover import duties and freight charges in addition to the value of the goods shipped. In these cases, the shipper stands to lose both the value of the merchandise shipped and the freight charges paid if the contract terms with the ship owner require that it prepay freight charges without any right to be reimbursed if the voyage is not completed.
The value of these charges may be added to the valuation of the goods and insured that way. The ship owner that stands to lose all of its expected revenue if the voyage is not completed may also insure the cargo.
An importer that pays import duties and then discovers partial damage to the merchandise sustains at least a partial loss of those duties. The coverage form or policy may be written to cover the duty payable and insure it separately.
The merchandise may sustain loss or damage. In that case, the insurance company pays the importer for both the loss or damage and the duties paid. In return, the importer agrees to try to obtain a refund of the duty it paid on the merchandise.
General Average - Ocean marine policies also cover general average charges for which the insured may become liable, whether coverage applies to the cargo or the vessel itself.
Sue and Labor-Salvage - The sue and labor clause in inland marine insurance coverage forms comes from ocean marine policies and is similar to them. They require that the insured do everything possible to protect damaged property from further loss. The insurance company reimburses the insured for any expenses it incurs to do so.
In ocean marine insurance, sue and labor expenses may be significant. A wide variety of expenses may be needed to save a ship or its cargo from a threatening peril or to protect property after the vessel is unable to complete its voyage on time.
For example, a storm may force the vessel to put in at a port of refuge and purchase additional quantities of feed for the insured cattle on board.
This expense falls in the sue and labor clause. Other examples are a ship to be raised or towed to dry dock for emergency repairs; cargo damaged in a storm having to be hauled to an inland point to be dried out, repacked, or treated; or cargo that must be unloaded and placed on another ship.
The vessel's master acts as the cargo owner's agent and is empowered to use all reasonable means and incur any necessary expenses to protect the property in transit. Only sue and labor expenses incurred to protect covered property from an insured peril are covered.
These expenses are available in addition to the limit of insurance for a total loss.
Ocean marine policies may be tailored to cover any perils the insurance company agrees to provide. Some companies provide all risks type coverage on only certain commodities. However, these policies usually cover certain specified perils only, as follows:
Perils of the Sea - This coverage applies to all perils usual to transportation that reasonable human effort cannot prevent. Typical perils of the sea are sinking, stranding, heavy weather, colliding with other vessels or submerged objects, damage by sea water that an insured peril causes, and damage due to the vessel's seams opening because of stranding or other perils.
A storm may blow off the tarpaulin on a hatch and rain may damage the cargo. That loss or damage is considered due to a peril of the sea.
If a sling used to reload cargo during a heavy storm breaks because of the storm, the resulting loss of cargo is covered. Lightning is also included as a peril of the sea.
In all cases, a peril of the sea must be fortuitous, be due to an uncontrollable action of the sea, and be beyond reasonable human control. For example, there is no coverage if rain seeps through a tarpaulin that action of the sea did not damage.
In another example, there is no coverage for damage to cargo caused by a hose negligently allowed to run.
Fire - Ocean marine policies cover loss or damage caused by fire, even though it is not a peril of the sea. Coverage does not apply to loss or damage by fire that occurs due to inherent vice or the nature of the merchandise. Coal, burlap, and certain other commodities are prone to spontaneous combustion if they are loaded in a damp condition. Those losses are not covered.
Combustible cargo is sometimes accepted for insurance coverage with special restrictions or limitations against spontaneous combustion.
Assailing Thieves - Coverage does not apply to loss caused by petty theft. Only theft accompanied by violence is covered.
Jettison - Jettison is the act of throwing cargo overboard and is covered only when done to save and preserve other covered property from loss. Coverage does not apply to property thrown overboard due to spoilage, such as with foodstuffs, plants, and hides.
Barratry of the Master - Barratry is a fraudulent breach of duty by the master of a vessel that causes loss to the cargo's owner or to the vessel's owner. Barratry of the master is covered unless it is done in collusion with the vessel's owner.
If the master commits an act of barratry in a conspiracy with one of the cargo owners, loss or damage to the cargo of the other owners is covered.
All Other Perils - Ocean marine policies cover "all other perils which shall come to the hurt, detriment, or damage" of the goods. This clause may appear to make the policy cover against all risks but it does not. The way it applies means only perils similar to insured perils.
If a vessel is in dry dock on heavy supports for repairs and a heavy wind blows down the supports, the damage to the vessel is covered. On the other hand, if the incoming tide washes away the supports, the resulting loss is not covered. This is because the parties that placed the vessel on the supports should have known that the tide would come in. As a result, this loss is not treated as caused by a peril of the sea.
Explosion - Latent Defects in Machinery, Hull, Appurtenances (Inchmaree) - Most ocean marine policies cover loss or damage caused by boilers bursting, shafts breaking, or that result from any latent defect in the machinery, hull, or equipment, as well as through faults and errors in navigating or managing the vessel. This is known as the Inchmaree clause, from a celebrated court case that involved a vessel with that name.
Optional Hazards That May Be Added - The insured and the insurance company may agree to add other covered perils to the policy for an additional premium charge.
Some of the perils frequently added include theft where no assailing thieves are involved, pilferage, non-delivery, fresh water damage, contact with other cargo, breakage, leakage, hook-hole damage, spoilage of refrigerated goods because of refrigeration equipment breakdown, and sweat damage due to condensation from bulkheads and other cargo.
Other perils added from time to time include damage caused by fuel oil or oil carried as cargo, chafing or rubbing of the cargo, taint damage due to contact with other cargo or from taking on odors from other merchandise, overheating of cargo placed too close to the engine room, and loss due to bad stowage, to name just a few.
Hazards Covered on Land - As reviewed under Where Covered, ocean marine policies usually cover property on land in the course of transit. It lists the following land perils that are usually insured:
- Fire, lightning, and sprinkler leakage
- Cyclone, hurricane, earthquake, flood, collapse, or subsidence of docks and wharves
- Collision, derailment, overturn, or other accident to conveyances
What Doesn't Ocean Marine Insurance Cover?
Basic ocean marine policies exclude certain perils. However, coverage for many of them may be added by endorsement for an additional premium charge. The old language of ocean marine policies carries over and exclusions are phrased as "warranted free from."
Dampness/Breakage - Basic ocean marine policies exclude loss or damage to goods caused by dampness, change of flavor or by being spotted, discolored or musty, unless caused by actual contact with sea water due to a peril of the sea.
Breakage is covered only if sinking, stranding, collision of the vessel, or fire causes the breakage.
Delay/Loss of Market - Basic ocean marine policies do not cover loss caused by delay or loss of market unless that coverage is added by endorsement. These losses are considered incidental and usual to business transactions and are usually excluded, except for certain special commodities.
An example is meat, where there may be coverage for spoilage due to delay when a fortuitous event such as a storm, fire, or lightning causes the delay.
Acts of War, Confiscation, Detainment, Revolution (Free of Capture, Seizure Clause-FC&S) - Coverage does not apply to loss or damage caused by capture, seizure, arrest, detainment, confiscation, preemption, requisition, or nationalization, whether in time of peace or war.
Loss or damage due to any hostilities or warlike operations and damage caused by any weapons of war that employ atomic or nuclear fission and/or fusion or other reaction or radioactive force or matter is also excluded.
This exclusion also includes embargoes or other measures that interfere with the free flow of trade as well as all warlike acts, revolution, insurrection, and similar occurrences.
This clause clarifies that loss or damage due to collision, explosion, stranding, heavy weather, or fire is excluded only if directly caused by a hostile act. Loss or damage due to contact with mines or torpedoes is specifically excluded.
Shippers are subject to these perils even in peacetime and frequently insure their cargo against them under war risk policies.
Most insurance forms and policies exclude risks of war but ocean marine underwriters routinely provide coverage for an additional premium charge. This coverage is usually written as a separate policy.
Strikes, Riots, Civil Commotion - Basic ocean marine policies exclude loss or damage caused by or that results from strikes, lockouts, labor disturbances, riots, civil commotion, or the acts of any persons who take part in such disturbances.
Ocean marine policies cover these perils and certain losses caused by vandalism, malicious mischief, and sabotage under the Strikes, Riots, and Civil Commotion (SR&CC) endorsement. It covers damage, theft, or pilferage caused by strikers, rioters, persons who take part in civil commotion, and persons who act maliciously.
The coverage provided does not apply to delay, deterioration, or loss of market that such persons cause but does apply to direct damage they cause. It excludes any loss or damage caused by weapons that employ atomic or nuclear energy.
Ocean marine policies provide limited coverage for vandalism, sabotage, and malicious mischief within the continental United States and Canada. Coverage applies to loss or damage caused by agents of any government, if their actions are done in secret and are not connected with any military operation in the country where the property is located.
Like the strikes and riots coverage outlined above, coverage does not apply to loss or damage caused by weapons that employ atomic or nuclear energy.
All Risk Insurance - As stated above, insurance companies often provide all risks type coverage on certain commodities. Most manufactured goods qualify for this broader coverage. Flour, hides, and skins are examples of other products often insured on this basis.
Ocean marine policies written on this basis insure against all risks of direct physical loss or damage from any external cause, regardless of percentage. Certain exclusions apply, usually the FC&S, SR&CC perils, and losses due to delay or loss of market as outlined above.
Where Does Ocean Marine Insurance Cover The Ship And Cargo?
Ocean marine insurance policies are written from time to time to insure goods only when on the high seas. However, most are written on a "warehouse to warehouse" basis. The property is covered from the moment it leaves the shipper's premises until it is delivered to the warehouse of the consignee named in the policy.
The subsequent inland coverage is limited to 15 days after the property is unloaded from the vessel. However, the subsequent inland coverage extends up to 30 days if the property's final destination is outside the port's limits.
Ocean marine insurance policies may cover property in the course of inland transportation for many miles before it is loaded on the vessel. After that, it covers the property while on the vessel, after it arrives at the port, and again over inland routes to the consignee's premises.
The basic coverage terms are somewhat different when the property is on land versus on the high seas, as outlined under Hazards Covered. When all risk type coverage is provided, these conditions apply on a "warehouse to warehouse" basis.
It is important to understand that coverage applies only while the goods are in due course of transportation. The property must be in continuous movement usual and ordinary to the normal transportation routine.
From time to time, the shipper may have to stop transportation in order to re-pack or re-label the property or to allow buyers or financial institutions to examine it. In these cases, an endorsement is necessary to provide coverage during these delays.
Marine Extension Clauses - by eliminating the requirement of continuous transit. This endorsement also eliminates the 15-day or 30-day limit on inland transit after the property is unloaded from the vessel. It covers such interruptions or suspensions of transit if the circumstances that cause the delay are beyond the insured's control.cOn-Deck Shipments - Ocean marine policies usually specifically state that they cover "shipments under deck." Whether specifically excluded or not, they exclude property shipped on deck unless the insured tells the insurance company that the property is being shipped that way.
This well-established rule has an exception for property shipped on deck as law or shipping custom requires. In cases where the practice is firmly established, it is generally assumed that the insurance company knows about the practice and coverage applies even if the owner did not give notice.
Some policies cover on-deck shipments for sub-limits against only certain stated perils.
Type of Vessels on Which Goods Are Carried - Ocean marine policies are usually endorsed to provide coverage only when the property is shipped on iron or steel vessels. In most cases, property shipped on sailing vessels is excluded.
Seaworthiness of the Vessel - Seaworthiness of the vessel is one of several implied ocean marine warranties. These warranties developed out-of-court decisions that affected ocean marine insurance and are as binding on the insured as any written into the coverage form or policy.
All ocean marine policies are subject to the implied warranty of the vessel's seaworthiness. This requires that the ship be suitably constructed, properly equipped, manned, fueled, and provisioned for the type of voyage or for the separate parts of the voyage involved.
A vessel rigged to navigate a bay, river, or coastwise channel may not be seaworthy to make a transatlantic crossing. Similarly, certain vessels properly equipped to transport one type of cargo may be inadequately equipped to transport other types.
Most ocean marine policies have a special clause that states the vessel's fitness or seaworthiness because shippers usually do not know if the vessel that transports its property is fit or seaworthy.
No Deviation - Another implied warranty in all ocean marine policies is that of "no deviation." Once the voyage begins, no substitution or deviation from the agreed or usual course is permitted under any circumstances.
However, there is an exception when deviations or substitutions are required because of adverse weather conditions, unavoidable accident, or by circumstances beyond the control of either the vessel's owner or its master.
There are also exceptions in cases that involve saving lives, whether on the insured vessel or another, or to obtain medical or surgical services for persons on board.
Any other deviation voids coverage, even if the vessel subsequently resumes the original course. In cases where the deviation is relatively minor, such as for one hour or for a mile, maritime courts have held that coverage suspends only during the deviation and resumes when the deviation ends.
It must be emphasized that exceptions are rare and any unexcused deviation usually voids coverage, even if the vessel subsequently resumes the original course.
Shippers usually do not have any say or influence over the navigation of the vessel that transports their property. Because of this, it is customary to insert a clause in ocean marine policies that states that coverage is not voided by deviation that the insured did not know about or by any unintentional error in describing the vessel, voyage, interest, or interruption in the ordinary course of transit.
Under this clause, the insured must inform the insurance company of any deviation it becomes aware of and pay any additional premium required to cover the increased risk.
When Does Ocean Marine Insurance Cover The Ship And Cargo?
Ocean marine insurance policies usually cover on a "warehouse to warehouse" basis. Coverage need not attach from the time the policy is written but may be issued to cover a prospective voyage.
Another implied warranty in ocean marine insurance that may affect coverage is the implied warranty of prompt attachment. It is assumed that the voyage begins within a reasonable time. If not, the policy is void, unless the insurance company agrees to an extension.
This warranty is firmly rooted in ocean marine insurance because the risk of loss in a particular voyage may be significantly higher at different times of the year. Because of this, the insurance company is entitled to know when the goods are moved.
How Does Ocean Marine Insurance Value Ship And Cargo?
Ocean marine insurance is usually written on a valued basis. The insured and the insurance company agree to the property's value when the policy is written or when the shipment is made. This valuation is binding on both parties if a loss occurs and neither party can reopen the question except in cases where fraud is alleged and proved.
Several valuation clauses are used regularly but the property is usually valued "at invoice cost plus 10% plus freight." The policy may have to be endorsed to value property subject to price fluctuations at the property's highest market value during any point in the voyage.
Coinsurance - Ocean marine policies usually do not have a coinsurance clause and losses are usually settled based on the property's agreed valuation. In cases that involve partial losses, recovery is based on the extent of damage to the property.
For example, if 100 cases of merchandise that have an agreed value of $1,500 each are found to be damaged when they arrive at their destination, the first thing done is to determine the reduction in value.
If the market value of each case in sound condition is $2,000, and the value of the damaged property is $1,000, the insured is entitled to 50% of the insured value, or $750 per case. The formula is expressed as follows: Depreciation x Insured Value = Sound Market Value
Particular Average - In insurance terms, "average" means less than a total loss. "Particular average" refers to a loss that affects only a single interest, as opposed to "general average," which affects all interested parties in the voyage. Except for certain all risk policies, all ocean marine policies contain some "average" clauses that limit recovery on most partial losses. Several types of "average" clauses are described below.
Free of Particular Average (FPA) American Conditions - This clause reads, "Free of Particular Average (unless General) or unless caused by stranding, sinking, burning, or collision with another vessel." Under the terms of this clause, total loss of a shipment is covered, regardless of how it was caused.
However, partial losses are covered only if one of the designated perils of the sea causes the loss. This is the most restrictive average clause.
Free of Particular Average (FPA) English Conditions - This clause reads, "Free of Particular Average (unless General) or unless the vessel be stranded or craft be stranded, sunk, burnt, on fire or in collision with another vessel."
This clause is essentially the same as the American conditions. However, under its terms, coverage applies to partial losses that one of the designated perils of the sea causes or that takes place after one of those perils occurs. Under the terms of this clause, if the vessel is stranded, the warranty is open during the rest of the voyage and all partial losses are paid, even if they cannot be traced to the stranding or any other peril of the sea.
The English clause usually applies to shipments under-deck. The American conditions usually apply to shipments on-deck.
With Average (W.A.) - This clause is less restrictive than either of the FPA clauses described above. It reads, "Subject to Particular Average if amounting to 3% (unless General), or the vessel or craft is stranded, sunk, burnt, on fire or in collision."
Under this clause, partial losses that exceed 3% of the property's value are covered, as are smaller losses if one of the designated perils causes the loss. Other percentages may be used in place of these and some policies contain a clause that establishes different percentages for particular average losses on different commodities.
Average clauses may also include other perils in addition to those designated in this clause. Some perils commonly added include theft, pilferage, non-delivery, breakage, fresh water damage, and sweat damage, to name a few.
Memorandum Clause - The particular average percentages may vary for different commodities based on their perceived or estimated susceptibility to damage. Some commodities are listed as free of particular average, but others specify a percentage of 20%, 10%, 7%, 3%, or some other percentage. The following is an excerpt from a typical memorandum clause:
"It is also agreed that bar, bundle, rod, hoop and sheet iron, wire of all kinds, tin plates, steel, madder, sumac, wickerware and willow, salt, grain of all kinds, tobacco, fruits, cheese, dry fish, hay, vegetables, rags, bags, household furniture, skins and hides, musical instruments, looking glasses, and all other articles that are perishable in their own nature are warranted by the insured free from Average unless General; hemp, tobacco stems, matting and cassia, except in boxes, free from Average under 20% unless General; sugar, flax, flaxseed, and bread are warranted by the insured free from Average under 7% unless General; and coffee in bags or bulk, pepper in bags or bulk, and rice, free from Average under 10% unless General ..."
The phrase "unless General" appears after all particular average percentages. It indicates that any loss that a particular interest sustains for the benefit of all interests is a general average loss and not subject to particular average.
In other words, if part of a particular owner's cargo is jettisoned to lighten the ship, that loss comes under general average and is not subject to the particular average percentage.
The particular average clause is not a deductible. The entire loss is paid once the loss exceeds the stated percentage. For example, assume that a shipment valued at $100,000 is subject to particular average, if amounting to 3%. Nothing is paid if a peril other than as designated in the clause for any amount less than $3,000 damages the cargo.
However, the entire loss is paid if the insured loss exceeds $3,000. This type of clause is known as a franchise clause.
The average clause is applied to the entire shipment's value unless some qualifying language modifies the franchise clause. When the value of a single shipment is very high, the clause may be worded or arranged to apply to a unit or part of the shipment, such as to each lot, to 25 bags, or to a dollar amount, such as to each $10,000.
Abandonment - When a vessel or its cargo incurs a large loss, the costs of salvage are usually so high that it does not make any sense to attempt repairs or to save the property. These kinds of losses are referred to as constructive total losses and the insured may attempt to abandon the property to the insurance company when they occur.
If the company accepts the abandonment, it pays the insured for the total value of the goods or the vessel, as the case may be, and takes any salvage that remains.
In marine insurance, the insured has the option to abandon property to the insurance company. The company cannot insist on taking the insured property and paying a total loss. This is the opposite of the rule in property insurance where the insurance company has the option to take all of the property and pay for a total loss.
The insured agrees to not abandon insured property in case of capture or seizure until 90 or more days after the property is condemned. In case of blockade, the insured agrees to not abandon the property but to proceed to the nearest port where the voyage ends.
Machinery or Manufactured Goods - If one part of a machine being transported is damaged, the entire machine may be useless. Similarly, a single part of manufactured property that consists of several parts may be damaged, but the entire property value is lost.
Ocean marine policies limit the insurance company's liability to the value of the lost or damaged part or to the cost to repair or replace the part, at the insured's option.
Other Insurance - In some cases, two or more parties insure the same shipment. Under American practice, the policy with the earliest effective date is primary and the second one is liable for only the excess of the loss over the primary limits that apply.
However, the English rule is different. Under English practice, either policy responds and the insurance companies then work out their respective shares of the total liability.
What Types Of Ocean Marine Insurance Are Available?
Ocean marine policies may be written to cover only a single shipment. However, open policies are customarily used in cases where the insured makes regular shipments. These policies do not have an expiration date and are written on a continuous until cancelled basis. It is possible that an open policy in force today were first written nearly 100 years ago.
Open policies are very convenient for shippers because they automatically cover any shipments made. The shipper must report any shipments made as soon as possible but the shipment is covered even if the shipper forgets to report it. The shipper does not have to arrange coverage on every shipment.
Another advantage is that the shipper knows exactly what the insurance premium will be when it negotiates prices on goods and merchandise.
The insured reports shipments to which coverage applies in one of two ways. If it is not required to furnish evidence of insurance to third parties, which is often the case with imports, the insured completes a short form declaration that names the vessel, the shipment's origination point, the destination, the quantity and type of property, and the amount of insurance needed.
The insured sends this declaration to the insurance company and it bills the insured monthly according to the rates that apply.
In cases that involve exports, the insured must usually show evidence of insurance coverage to the customer, banks, or other interested parties. This is done with a special marine policy or certificate the insured can issue that gives all of the shipment's details.
Other Ocean Marine Insurance Policy Considerations
Cargo War Risk Policy
Ocean marine insurance policies exclude the war perils. This includes collision losses caused by the vessel striking floating mines even in peacetime. However, these risks may be insured and are usually covered under a separate policy written at the same time as the basic ocean marine policy.
The war risk policy covers almost all war group perils that basic ocean marine policies exclude. It is essentially the same as the basic ocean marine coverage except for the perils insured. However, the war risk policy is different because it may be canceled with 48-hours' notice instead of the 30 days usually required for ocean marine policies.
In addition, coverage does not apply before the cargo is loaded or more than 15 days after the cargo is unloaded at the final port of destination. Cargo at an overseas port may have to be transshipped to another vessel. In that case, coverage is effective for 15 days after the cargo reaches the port. Coverage then ends until the property is actually loaded on the new vessel.
The basic ocean marine policy is the same for both ship owners and shippers. It is called hull coverage when it covers the vessel itself.
In addition to covering the vessel itself, the vessel owner's legal liability to others that arises from the vessel colliding with another ship or vessel is also covered.
Cargo policies are usually written for an indefinite period and do not have an expiration date. Hull coverage is usually written to cover a particular voyage or for a one-year term.
It may contain a trading warranty that restricts coverage while the vessel is within certain waters or specific geographical limits.
The implied warranty of seaworthiness applies to hull policies written on a voyage basis but does not apply to those written on a time basis. Coverage on a time basis policy may attach when the vessel is at sea, and imposing the warranty of seaworthiness on the vessel's owner under those circumstances might impose a hardship.
However, the insured must take all reasonable steps required to make the vessel seaworthy after it puts in at a port where repairs can be made.
The warranty of seaworthiness with respect to a vessel's owner does not extend to the cargo. The cargo shipped may be in such a condition that it endangers the vessel. In that case, hull coverage is not voided unless the insured knew about the dangerous condition of the goods and negligently allowed them to be loaded anyway.
There is a special policy that insures pleasure craft such as yachts, motorboats, and sailboats. It covers the watercraft owner's property and its liability for collision damage caused to other vessels. It may be endorsed to cover liability for other collisions and for injury to persons.
The policy describes the watercraft insured and covers the hull and its appurtenances, such as spars, sails, tackle, machinery, boats, and furniture.
The hull may be insured by one of two different policies: Limited hull policies cover loss or damage caused by the perils of fire and lightning or fire, lightning, and theft.
Full marine policies cover the following perils:
- Conversion of the watercraft by its master or mariner to his or her own use.
- Explosion, bursting of boilers, or breaking of shafts through latent defects in the hull or machinery. This is the coverage ocean marine policies provide under the Inchmaree clause. This is reviewed under Marine Cargo Policy-Hazards Covered-Latent Defects In Machinery, Hull, Appurtenances.
- Fire, lightning, explosion.
- Perils of the sea.
- Theft of the entire watercraft and its equipment by persons who make forcible entry into it.
- When part of the watercraft, tackle, or furniture is removed from the watercraft and stored on shore, coverage applies to only loss or damage the fire causes and not for more than 50% of the amount of insurance that applies to the hull.
The yacht policy also covers the insured's liability for collision with other vessels. This coverage does not apply to collision damage caused to property other than boats. Coverage for liability for damage to bridges, piers, docks, wharves, buoys, and other property that the insured's collision with them causes may be added by using protection and indemnity coverage.
This coverage also applies to the insured's liability for bodily injury or death caused by operating the watercraft.
Basic yacht policies exclude the SR&CC perils and the FC&S perils discussed above. Coverage is specifically restricted and applies to only the waters or operating territory described in the policy. It is usually written for a one-year term and usually specifies certain months of the year when the vessel is laid up and does not operate.
Either party may cancel the yacht policy by giving proper notice to the other party for the appropriate time period that applies in the particular jurisdiction.
All Risk Yacht Policy
A number of insurance companies write all risk yacht insurance for risks that qualify for this broader coverage. These policies cover all risks of direct physical loss or damage and exclude only certain stated perils. The normal exclusions are as follows:
- Wear, tear, gradual deterioration, and inherent vice
- Marine borers and vermin
- Loss caused by or that results from ice or freezing while afloat
- Loss or damage to any spinnaker (sail) while racing
- Theft or mysterious disappearance of equipment or accessories unless there is visible evidence of forced entry or the entire yacht is stolen
Ocean Marine Insurance - The Bottom Line
Whether you're required to purchase marine insurance, or you want to ensure that you are protected from the many perils of transporting goods across the world's oceans, speak with a reputable insurance broker who specializes in ocean marine insurance.
Types Of Small Business Insurance - Requirements & Regulations
Perhaps you have the next great idea for a product or service that you know will appeal to your local area. If you've got a business, you've got risks. Unexpected events and lawsuits can wipe out a business quickly, wasting all the time and money you've invested.
Operating a business is challenging enough without having to worry about suffering a significant financial loss due to unforeseen and unplanned circumstances. Small business insurance can protect your company from some of the more common losses experienced by business owners, such as property damage, business interruption, theft, liability, and employee injury.
Purchasing the appropriate commercial insurance coverage can make the difference between going out of business after a loss or recovering with minimal business interruption and financial impairment to your company's operations.
Insurance is so important to proper business function that both federal governments and state governments require companies to carry certain types. Thus, being properly insured also helps you protect your company by protecting it from government fines and penalties.
Small Business Insurance Information
In the business world, there are many risks faced by company's every day. The best way that business owners can protect themselves from these perils is by carrying the right insurance coverage.
The The National Association of Insurance Commissioners (NAIC) is the U.S. standard-setting and regulatory support organization. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer review, and coordinate their regulatory oversight.
Commercial insurance is particularly important for small business owners, as they stand to lose a lot more. Should a situation arise - a lawsuit, property damage, theft, etc. - small business owners could end up facing serious financial turmoil.
According to the SBA, having the right insurance plan in place can help you avoid major pitfalls. Your business insurance should offer coverage for all of your assets. It should also include liability and casual coverage.
Types Of Small Business Insurance
Choosing the right type of coverage is absolutely vital. You've got plenty of options. Some you'll need. Some you won't. You should know what's available. Once you look over your options you'll need to conduct a thorough risk assessment. As you evaluate each type of insurance, ask yourself:
- What type of business am I running?
- What are common risks associated with this industry?
- Does this type of insurance cover a situation that could feasibly arise during the normal course of doing business?
- Does my state require me to carry this type of insurance?
- Does my lender or do any of my investors require me to carry this type of policy?
A licensed insurance agent or broker in your state can help you determine what kinds of coverages are prudent for your business types. If you find one licensed to sell multiple policies from multiple companies (independent agents) that person can often help you get the best insurance rates, too. Following is some information on some of the most common small business insurance policies:
|Business Insurance Policy Type||What Is Covered?|
|General Liability Insurance||What is covered under commercial general liability insurance? It steps in to pay claims when you lose a lawsuit with an injured customer, employee, or vendor. The injury could be physical, or it could be a financial loss based on advertising practices.|
|Workers Compensation Insurance||What is covered under workers compensation insurance? This type of insurance protects a business and its owner(s) from claims by employees who suffer a work-related injury, illness or disease. Workers comp typically provides the injured employee with benefits to cover medical expenses, a portion of his/her lost wages, rehabilitation costs if applicable, and permanent partial or permanent total disability.|
|Product Liability Insurance||What is covered under product liability insurance? I pays an injured party's settlement or lawsuit claim arising from a defective product. These are usually caused by design defects, manufacturing defects, or a failure to provide adequate warning or instructions as to how to safely use the product.|
|Commercial Property Insurance||What is covered under business property insurance? General liability policies don't cover damages to your business property. That's what commercial property insurance is for. It protects all of the physical parts of your business: your building, your inventory, and your equipment, giving you the funds you need to replace them in the event of a disaster. If you work from home, you might consider a Home Based Business Insurance policy instead.|
|Business Owners Policy (BOP)||What is covered under a business owners policy (BOP)? This is a policy designed for small, low-risk businesses. It simplifies the basic insurance purchase process by combining general liability policies with business income and commercial property insurance.|
|Commercial Auto Insurance||What is covered under business auto insurance? This type of insurance covers automobiles being used for business purposes. This could include a fleet of business-only vehicles or a single company car. In some cases it might cover your car or your employee's car while they're being used for business. These policies have much higher limits, ensuring you can cover your costs if one of these vehicles gets into an accident.|
|Commercial Umbrella Policies||What is covered under commercial umbrella insurance? This type of policy is a sort of "gap" insurance. It covers your liability in the event that a court verdict or settlement exceeds your general liability policy limits.|
|Liquor Liability Insurance||What is covered under liquor liability insurance? It covers bodily injury or property damage caused by an intoxicated person who was served liquor by the policy holder.|
|Professional Liability (Errors & Omissions)||What is covered under professional liability insurance? This type of business insurance is also known as malpractice oe E&O. It covers the damages that can arise from major mistakes, especially in high-stakes professions where mistakes can be devastating.|
|Surety Bond||What is covered under surety bonds? Bonding is a contract where one party, the SURETY (who assures the obligee that the principal can perform the task), guarantees the performance of certain obligations of a second party, the PRINCIPAL (the contractor or business who will perform the contractual obligation), to a third party, the OBLIGEE (the project owner who is the recipient of an obligation).|
Who Needs General Liability Insurance? - Virtually every business. A single lawsuit or settlement could bankrupt your business five times over. You might also need this policy to win business. Many companies and government agencies won't do business with your company until you can produce proof that you've obtained one of these policies.
Business Insurance Required by Law
If you have any employees most states will require you to carry worker's compensation and unemployment insurance. Some states require you to insure yourself even if you are the only employee working in the business.
Your insurance agent can help you check applicable state laws so you can bring your business into compliance.
Other Types Of Small Business Insurance
There are dozens of other, more specialized forms of small business insurance capable of covering specific problems and risks. These forms of insurance include:
- Business Interruption Insurance
- Commercial Flood Insurance
- Contractor's Insurance
- Cyber Liability
- Data Breach
- Directors and Officers
- Employment Practices Liability
- Environmental or Pollution Liability
- Management Liability
- Sexual Misconduct Liability
Whether you need any or all of these policies will depend on the results of your risk assessment. For example, you probably don't need an environmental or pollution policy if you're running an IT company out of a leased office, but you would need data breach and cyber liability policies to fully protect your business.
Also learn about small business insurance requirements for general liability, business property, commercial auto & workers compensation including small business commercial insurance costs. Call us (855) 767-7828.
Additional Resources For Small Business Insurance
Protect your company and employees with the right commercial insurance policies. Read informative articles on small business insurance coverages - and how they can help shield your company from legal liabilities.
- Small Business
- Business General Liability
- Business Interruption
- Business Liability
- Business Owners Policy (BOP)
- Certificate of Insurance
- Commercial Auto
- Commercial Crime
- Commercial Package Policy
- Commercial Umbrella
- Comprehensive General Liability
- Directors and Officers Liability
- Cyber Liability
- Employers Liability
- Employment Practices Liability
- Event Cancellation
- Fiduciary Liability
- General Liability
- Home Based Business
- Independent Contractor
- Liability Insurance Certificate
- Liability Insurance
- Ocean Marine
- Professional Liability
- Workers Compensation Insurance
Your small business faces many potential disasters including: fire, floods, theft, equipment breakdown, lawsuits from clients or customers and current & former employees. Any many other risks you haven't even thought about.
A small business commercial insurance program should provide protection for both larger and smaller disasters. The obvious things like fire, flood and theft most business owners think about... but what if a hacker infects your computers with a virus - and files containing private customer information like credit card and Social Security numbers are stolen?
Who is going to pay to fix your customers credit rating etc...? Will your insurance pay for the cost? You need to know that.
Your commercial insurance program should cover events that can close down your company, or cause it to lose revenue. Anything less than that is not enough coverage. Commmercial insurance doesn't cover everything, and all policies have exclusions and limits.
You need a written plan that allows you to get your operations back up and running as quick as possible.